Shellys Shampoo ended October with inventory of 2000 Shellys

Shelly’s Shampoo ended October with inventory of $2,000. Shelly’s purchased $38,000 of inventory during November and had $6,000 of inventory on hand at the end of November. Complete the T account for Shelly’s Inventory. How much inventory did they sell during October? ___________________ If they sold that inventory for $50,000, how much revenue did they have? _______________What is their Gross Margin? _______________

Write the journal entry to record Shelly’s purchases:

Write the journal entry to record Shelly’s revenue:

Write the journal entry to record Shelly’s expense:

Solution

Inventory Beg. Bal.      2,000.00    32,000.00 Cost of Goods Sold Purchase    38,000.00 End. Bal.      6,000.00 Inventory Sold during November = $32,000 Revenue of November = Sales Revenue = $50,000 Gross Margin = $50,000 (Sales) - $32,000 (Cost of Goods Sold) Gross Margin = $18,000 Gross Margin Rate = $18,000 / $50,000 Gross Margin Rate = 36% Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Inventory    38,000.00 Accounts Payable / Cash    38,000.00 (record the inventory purchased) 2 Accounts Receivable / Cash    50,000.00 Sales Revenue    50,000.00 (record the sales done) 3 Cost of Goods Sold    32,000.00 Inventory    32,000.00 (record the cost of inventory sold)